The 5 stages of business growth to maximise value

The 5 stages of business growth to maximise value

 

As a business owner, you’ve no doubt heard the phrase “scaling a business” but what does that actually mean?

How do you know when your business is ready to scale? And what are the different levels of scale?

Understanding the stages of business growth can help you identify where your business is now, and what steps you need to take to get to the next level.

 

Stage 1: Viability

Proving you have a viable concept

In this early start-up phase, your objective is to prove that you have a viable concept that will eventually be profitable.

At this stage, you’re pulling together the initial resources for the business, including people and initial funding. You are also pulling together a launch plan. You will want to get as much market feedback as you can to help you determine if your model is viable.

Once your business idea has been validated, you then have a clear understanding of who your customers are, what their needs are, and how you can meet those needs. At this stage, your business may be generating enough revenue to cover its costs, but it’s not yet profitable.

Your key objectives at this stage are to:

• Develop plans, get market feedback, and test.
• Mobilise funding, people, and get the business off the ground.

Your status as a founder: No Control, No Freedom

 

Stage 2: Sustainability

Secure initial clients, become profitable and sustainable

Once your business is viable, the next step is to make it sustainable. This means that your business is generating enough revenue to cover its costs and make a profit. At this stage, you’re able to invest in your business and grow it, but it’s not yet able to handle a significant increase in demand.

Your key objectives at this stage are to:

• Make sure your business becomes profitable so it will be sustainable.
• Sell and generate cash flow so you can survive.
• Start building the four core systems – Marketing, Sales, Delivery/Operations, Finance.

Your status as a founder: Minimum Control, No Freedom

 

Stage 3: Reliability

Maintaining reliable income and building the core systems of the business

A reliable business can consistently meet customer needs and deliver on its promises.

Good systems and processes lay the foundation for this stage and will make the business more robust. To achieve this level of reliability, it is important to have a clear understanding of your target market, what they need from your business, and how you can deliver this effectively.

At this stage, your business can handle a moderate increase in demand and is becoming profitable.

Another important aspect is having a solid financial plan in place. This includes having a clear understanding of your business’s revenue streams, managing your expenses effectively, and managing cash flow effectively.

Your key objectives at this stage are to:

• Grow your sales.
• Improve your core systems and introduce KPI’s.
• Refine your strategic plan based on actual market data and focus on your financial plan.
• Start to stabilise the core systems and processes for sales and marketing to ensure your revenue base is secure.
• Start reducing the dependence on “you” as the hub of your business. Progressively implement people, systems, and processes to alleviate reliance on you.

Your status as a founder: Establishing Control, No Freedom

 

Stage 4: Scalability

Systems and processes in place, core areas of business now managed by others and revenue is growing

As you move to the next phase, the aim is to make it scalable. This means that your business can handle a significant increase in demand and can grow without proportional increases in costs. At this stage, your business is profitable, and you’re ready to expand.

A scalable business has the capability to expand its operations without being hindered by internal constraints. This typically involves having a strong foundation of systems and processes in place, a strong and adaptable business model, a clear and defined target market, and the ability to access and utilise resources effectively.

Additionally, a scalable business should have a solid and experienced leadership team, a strong financial position, and the ability to adapt to changing market conditions and customer needs. By addressing these key elements, a business can position itself to scale and grow in a sustainable and profitable manner.

Your key objectives at this stage:

• Keep driving strong sales growth.
• Ensure core systems are reliable and KPI’s are well defined.
• Solidify your core systems so they are scalable.
• Fill key roles and management hires to start taking place.
• Have more rigour around strategic planning.
• Reduce key-man risk across all areas of organisation, not just you as the business owner.

Your status as a founder: Full control, Establishing Freedom

 

Stage 5: Saleability

The final stage of business growth is having a saleable business. At this stage, your business is attractive to potential buyers and investors. It is profitable and has a strong competitive position in the market.

A saleable business is run by a competent and driven management team that is independent of the owner. While the owner may still fulfil one of the key executive roles, there is a clear line between ownership, and their role in the business. Ideally, there should be a good succession plan in place to replace the owner eventually, as well as succession planning in place for all key executives.

A business that is attractive to acquirers and saleable has several key elements, including a strong and consistent financial performance, a clear and defensible market position, a strong and experienced management team, a scalable business model, and a solid growth trajectory.

Additionally, a business that has a diversified revenue stream, a solid customer base, and a strong competitive advantage will also be seen as more valuable and desirable to potential acquirers.

Your key objectives at this stage:

• Significant growth of sales and year-on-year upward growth.
• Replacing yourself from as many areas of your business as possible and reducing key-man risk across the organisation.
• Strengthening capability of management team with succession plans.
• Clarity on exit options and aligning the other owners on what exit strategies to pursue.
• Developing the exit strategy and making it part of strategic planning.
• Mobilising the right advisors and team to help you execute on your exit plan.
• Ensuring that business continues operating successfully as exit plan is implemented.

Your status as a founder: Full Control, Full Freedom

 

Summing up

It’s important to note that not every business will go through all these stages, and some may move through them faster or slower than others. However, understanding these stages can help you identify where your business currently sits and what steps you need to take to get to the next level.

With a clear understanding of the stages of business growth, you can make informed decisions and take action to maximise the value of your company.

 

How can we help?

A successful business is never done and is never perfect. It’s a constant process of tweaking, making tough choices and being accountable for performance.

Our business improvement advisors work with clients to fix, grow and future proof. We give you hands-on help to get your business moving.

You can find out more about working with Marsh & Partners here. As your Absolute.Account.Ability partner we’re on a mission to make your business life better.